It is often thought that those who undertake out of necessity do not report the same well-being as those who do it out of opportunity, but a new study denies this.
January 20, 2021
4 min read
The opinions of the employees of Entrepreneur they are personal.
By: Dr. José Ernesto Amorós, National Director of Doctoral Programs at EGADE Business School in Tecnológico de Monterrey
One of the indicators for the development of a society is the level of entrepreneurial activity (creation of new businesses). More than the number of entrepreneurs, the quality of the businesses these individuals generate matters, which is closely related to both the motivation they have at the time of doing business and their long-term well-being.
That is why it is worth asking in the first place what motivates entrepreneurs to do business. In this sense, entrepreneurs are usually divided into two broad groups: those who do business out of necessity (to get out of a job they don’t like or are unemployed) or those who do it as an opportunity (to gain more autonomy, financial success or personal development). ).
Entrepreneurs’ motivation can be relevant to understanding their ambitions, which can affect the performance of companies. Moreover, entrepreneurship can have a close relationship with the well-being of these individuals. In fact, several studies have shown that many of these entrepreneurs and self-employed people tend to report higher subjective well-being and more fulfilling lives than salaried employees.
But do entrepreneurs whose motivation is opportunity report greater subjective well-being than those who do business out of necessity? Most researchers think so, associating ‘entrepreneurs by chance’ with positive traits such as rational risk-taking, tolerance for ambiguity, self-efficacy and goal-setting, while ‘entrepreneurs by necessity’ stand out. possible limitations in resources or skills, or your lack of vision for growth.
Image: Clique Images via Unsplash
The study “Entrepreneurship and Subjective Well-Being: Does Motivation to Start a Business Matter?“In which I collaborated concludes that the levels of subjective well-being of entrepreneurs are comparable by opportunity and by necessity. Our research is published in collaboration with Professors Oscar Cristi from the University of San Sebastián (Chile) and Wim Naudé from RWTH Aachen University and the IZA Institute for Labor Economics (Germany). Our research uses data from the Global Entrepreneurship Monitor (GEM) from approximately 160,000 entrepreneurs from 70 countries.
The study shows that the motivations of entrepreneurs can change over time, and that both needs and opportunities are the driving force behind entrepreneurship and are not necessarily mutually exclusive. Therefore, the results undermine the supposed dichotomy between “entrepreneurs by necessity” and “entrepreneurs by chance,” and show that they do not differ that much in ambition, risk-taking, or survival of their businesses. Other studies have found differences in the profitability of their businesses.
The main contribution of this research is that entrepreneurship, even motivated by necessity, contributes to the subjective well-being of entrepreneurs. This well-being is not only material or financial, it can also arise from the prioritization of psychological needs such as autonomy, performance or balance between work and family.
Finally, the results for Latin American countries suggest that higher subjective well-being may increase the likelihood of being an entrepreneur in general, as well as being an entrepreneur by chance, while individuals who have a high degree of of subjective well-being, are less likely to become involved. in entrepreneurial activities out of necessity.
